A bust, a bailout and new mortgage lending rules on clarkhoward.com

Another day, another wrinkle in the mortgage crisis and its impact on other sectors of the economy!

First off, we had the second-largest bank failure in U.S. history with IndyMac on Friday. Just a day later, Clark got a call from a relative who wanted him to talk to a family friend. Clark had to difficult task of explaining what happens when you have money that's not FDIC-insured in a failing bank.

The latest stats show that 37% of people have money above FDIC limits --$100,000 in a bank account and $250,000 for retirement accounts. If this train wreck has already happened to you, here's the scoop: If there are assets left over after all depositors have been reimbursed up to $100,000, then you'll get a portion of your unprotected money back.

Hopefully, you're not in this situation. Heed Clark's advice now and reduce your accounts to $90,000 so you don't forfeit a penny of interest in the event of a collapse.

Second, let's address the mortgage crisis involving Fannie Mae and Freddie Mac. These are both private corporations that created money for mortgages with a wink and nod and the understanding that taxpayers would back them up in the event of any difficulty.

Well, now the difficulty has arrived and Pres. Bush, Treasury Secretary Paulson and the folks at the Federal Reserve have agreed to bailout private stockholders with taxpayer money. This is unacceptable. The only reason it's happening is because Fannie Mae and Freddie Mac are politically connected.

Third, the Federal Reserve has issued new rules for banks making mortgage loans. The first rule states that they can't make a loan if you can't pay it back. Duh! That took a federal regulation?! Under the new rules, they have to make sure you can pay at the highest rate that your monthly payment could adjust for 7 years. In addition, there will be no more pre-payment penalties (in most instances) and escrow accounts will be required for property taxes and insurance.

What others are saying

new loan rules
Wachovia has issued new home loan rules-need credit score over 700 and 40% down. Is this the end for middle class home buyers? Are other lenders requiring this?
By alice @ 07/21/08 03:45:29 PMreport abuse
Your money could be insured for more than $100K
I would recommend that Clark give all the facts before recommending listeners to pull all money out of a financial over $90k. There are instances where your money is insured over $100K.

I recommend calling 1-800-ASK-FDIC - they can clarify the rules on FDIC coverage. Or go to:

http://www.fdic.gov/deposit/Deposits/insured/ownership.html

M.J. Murphy - your money very well may be insured up to $200K on a joint account - if you go to the link above and click on Joint accounts you can read more about it.
By Banker @ 07/17/08 05:19:22 PMreport abuse
FDIC Insurance and The Safety and Soundness of Your Bank
FDIC insurnce does not make a financial institution safe and/or sound. It does however provide comfort for those who do not know how to analyze their Banks performance and insures that the insuring agency (FDIC) is watching them. However over the past 50 years this has not kept Banks from failing due to sloppy lending procedures. The lure of high fees and ability to pass on loans to the secondary market - Freddy Mac and Fannie Mae - created a vast number of Banking and non-Banking financial managers willing to pass on loans that they would not have made if they were using their own funds.

What bothers me as a long time Banker, is that all Financial Institutions are not the same and do not have the same lending procedures. Some of us have been prudent and dilligent in acting as trustees of our clients funds. Not involving our Banks in high risk ventures or sloppy lending policies and
we are now being classified into the same group when it comes to FDIC insurance. By Clark advising customers to keep funds only in the amount of $90,000.00 is a slap in the face to the thousands of Banks that are very safe and sound in their lending practices. Clark constantly is advising his clients to deal with Credit Unions or Community Banks and keep away from the Big "customer no-service Banks". Clark, By advising customers to move funds from their institutions without analyzing their business practices is actually helping the big "no-customer service' Banks. Clark needs to spend more air time on explaining FDIC insurance and how deposits can be covered for many times the $100,000.00 basic coverage instead of scaring his public into removing funds from Financial instutions that are there to help them. The average person listens to Clark and many times agrees with what he says. We like Clark because he provides a refreshing change to everday talk shows. However Clark needs to remember that unless he tells the entire story, he can add to the mess that unfaithfull trustees of others money have placed us in. Thus helping spread the fear of a financial collapse for all institutions regardless of financial strength or prudent lending policies.
By Kevin @ 07/17/08 03:29:02 PMreport abuse
FDIC insured bank accounts
You said on Tuesday on the air that anyone with deposits in banks that exceed $100,000 should reduce that to less tnan $100,000. My wife and I have a joint account that exceeds that amount but our banker says that since it is a joint account that our FDIC insurance is $100,000 for each of us, giving us a total of $200,000 in insured savings. Is this true? This is the first time we've heard this.
By M.J. Murphy @ 07/16/08 05:19:29 PMreport abuse
No More Bailouts!
The more the government bails out companies, the closer capitalism will disappear from the U.S.A. Socialism is all too close...
By chris @ 07/15/08 04:28:34 PMreport abuse
Response to Paresh
Read the FDIC's Failed Bank Info in conjunction with the IndyMac disaster.

http://www.fdic.gov/bank/individual/failed/IndyMac.html

Essentially the FDIC is running IndyMac as a bank and so all previous features are preserved until a timely evaluation of the bank's overall state can be determined and changes can be phased in.
By Tom @ 07/15/08 12:37:44 PMreport abuse
What happens to Online Bill Pay if bank goes under?
With all the rumors circling around about banks going under, if my bank is folded, what happens to online bill pay? Does bank still function and honor and send bills scheduled? What happens to electronic bills?
By Paresh @ 07/15/08 10:20:03 AMreport abuse
Goin' down
This is a worldwide financial storm, and the only solution for the U.S. government is to inflate away its troubles. The U.S. dollar will steadily lose value and this will result in much higher prices for imported goods and commodities like oil. The resulting inflation "tax" will be paid by all Americans just so Congress can protect a few fat cats in the banking industry. Where is the outrage?
By Ed @ 07/14/08 04:43:18 PMreport abuse
New Fed regulations
There's a Middle Eastern proverb, "In the desert there's no need to put up signs saying, 'Don't eat rocks.'"

Well, many of the new Fed mortgage regulations are like "Don't eat rocks." They forbid things that no bank in its right mind would have done in the first place.
By MC @ 07/14/08 04:26:49 PMreport abuse
let the private stockholders take all the risk & lose their money
By Ben @ 07/14/08 04:14:40 PMreport abuse

new loan rules

Wachovia has issued new home loan rules-need credit score over 700 and 40% down. Is this the end for middle class home buyers? Are other lenders requiring this?

By alice @ 07/21/08 03:45:29 PMreport abuse

Your money could be insured for more than $100K

I would recommend that Clark give all the facts before recommending listeners to pull all money out of a financial over $90k. There are instances where your money is insured over $100K.

I recommend calling 1-800-ASK-FDIC - they can clarify the rules on FDIC coverage. Or go to:

http://www.fdic.gov/deposit/Deposits/insured/ownership.html

M.J. Murphy - your money very well may be insured up to $200K on a joint account - if you go to the link above and click on Joint accounts you can read more about it.

By Banker @ 07/17/08 05:19:22 PMreport abuse

FDIC Insurance and The Safety and Soundness of Your Bank

FDIC insurnce does not make a financial institution safe and/or sound. It does however provide comfort for those who do not know how to analyze their Banks performance and insures that the insuring agency (FDIC) is watching them. However over the past 50 years this has not kept Banks from failing due to sloppy lending procedures. The lure of high fees and ability to pass on loans to the secondary market - Freddy Mac and Fannie Mae - created a vast number of Banking and non-Banking financial managers willing to pass on loans that they would not have made if they were using their own funds.

What bothers me as a long time Banker, is that all Financial Institutions are not the same and do not have the same lending procedures. Some of us have been prudent and dilligent in acting as trustees of our clients funds. Not involving our Banks in high risk ventures or sloppy lending policies and
we are now being classified into the same group when it comes to FDIC insurance. By Clark advising customers to keep funds only in the amount of $90,000.00 is a slap in the face to the thousands of Banks that are very safe and sound in their lending practices. Clark constantly is advising his clients to deal with Credit Unions or Community Banks and keep away from the Big "customer no-service Banks". Clark, By advising customers to move funds from their institutions without analyzing their business practices is actually helping the big "no-customer service' Banks. Clark needs to spend more air time on explaining FDIC insurance and how deposits can be covered for many times the $100,000.00 basic coverage instead of scaring his public into removing funds from Financial instutions that are there to help them. The average person listens to Clark and many times agrees with what he says. We like Clark because he provides a refreshing change to everday talk shows. However Clark needs to remember that unless he tells the entire story, he can add to the mess that unfaithfull trustees of others money have placed us in. Thus helping spread the fear of a financial collapse for all institutions regardless of financial strength or prudent lending policies.

By Kevin @ 07/17/08 03:29:02 PMreport abuse

FDIC insured bank accounts

You said on Tuesday on the air that anyone with deposits in banks that exceed $100,000 should reduce that to less tnan $100,000. My wife and I have a joint account that exceeds that amount but our banker says that since it is a joint account that our FDIC insurance is $100,000 for each of us, giving us a total of $200,000 in insured savings. Is this true? This is the first time we've heard this.

By M.J. Murphy @ 07/16/08 05:19:29 PMreport abuse

No More Bailouts!

The more the government bails out companies, the closer capitalism will disappear from the U.S.A. Socialism is all too close...

By chris @ 07/15/08 04:28:34 PMreport abuse

Response to Paresh

Read the FDIC's Failed Bank Info in conjunction with the IndyMac disaster.

http://www.fdic.gov/bank/individual/failed/IndyMac.html

Essentially the FDIC is running IndyMac as a bank and so all previous features are preserved until a timely evaluation of the bank's overall state can be determined and changes can be phased in.

By Tom @ 07/15/08 12:37:44 PMreport abuse

What happens to Online Bill Pay if bank goes under?

With all the rumors circling around about banks going under, if my bank is folded, what happens to online bill pay? Does bank still function and honor and send bills scheduled? What happens to electronic bills?

By Paresh @ 07/15/08 10:20:03 AMreport abuse

Goin' down

This is a worldwide financial storm, and the only solution for the U.S. government is to inflate away its troubles. The U.S. dollar will steadily lose value and this will result in much higher prices for imported goods and commodities like oil. The resulting inflation "tax" will be paid by all Americans just so Congress can protect a few fat cats in the banking industry. Where is the outrage?

By Ed @ 07/14/08 04:43:18 PMreport abuse

New Fed regulations

There's a Middle Eastern proverb, "In the desert there's no need to put up signs saying, 'Don't eat rocks.'"

Well, many of the new Fed mortgage regulations are like "Don't eat rocks." They forbid things that no bank in its right mind would have done in the first place.

By MC @ 07/14/08 04:26:49 PMreport abuse

let the private stockholders take all the risk & lose their money

By Ben @ 07/14/08 04:14:40 PMreport abuse

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Jul 14, 2008 -- A bust, a bailout and new mortgage lending rules

What others are saying